CONGRATULATIONS, YOU HAVE A LIVING TRUST! DID ANYONE BOTHER TO FUND IT?
You met with the attorney (maybe several times), gave him or her all the information he or she needed about your assets, and finally got all the documents signed. You’re done, right? Time to check it off your to do list? Not so fast.
WHAT DO YOU MEAN BY “FUNDING THE TRUST” AND WHY DOES IT MATTER?
It never ceases to amaze me how many clients I encounter who have revocable living trusts prepared by other attorneys, but the trusts are either partially or completely un-funded. First of all, what do I mean by “funding” a trust? Simply put, it is the process of having assets re-titled from one’s individual name or titled jointly in the names of spouses into the name of the trust in language something resembling the following:
Joe Q. Public and Jane C. Public, trustees, or their successors in trust, under Public Family Trust, Dated December 31, 1999, as amended.
At a minimum, the attorney who prepared your trust should have told you which assets should be funded to the trust and given you at least some general instruction how to do this. Why does it matter? One of the most popular benefits of living trusts is probate avoidance. Why do so many people want to avoid probate? In order to administer your estate, your personal representative will likely want to hire an attorney to make sure the job is done right and avoid complaints (or lawsuits) from the beneficiaries. So, most people are referring to the desire to avoid the attorney’s fees associated with administering an estate in probate court. There’s also a lot of work associated with a probate proceeding. The court requires inventories, accountings, and numerous other filings. Most people would rather save their loved ones the time and aggravation of engaging in this process, if at all possible. Trust administration, while not at all free of responsibility and attorney involvement, is generally a simpler process.
BUSY WORK: WHY TRUSTS DON’T GET FUNDED
The most common reason trusts don’t get funded is lack of follow through. It’s not particularly difficult to re-title assets, but it does require some time and effort. Given how busy most people are nowadays, is it really any surprise that something like this falls through the cracks? Most people, when told by their attorneys that the process is not particularly difficult, opt to do it themselves rather than paying the attorney to do it (even at typically discounted rates).
If your trust is not funded, or if you are unsure, you should contact a qualified estate planning attorney to follow up.